Social Security: Average Indexed Monthly Earnings (AIME) Explanation

One of the key components that the Social Security Administration uses to calculate your Social Security retirement benefit is called the Average Indexed Monthly Earnings, or AIME (don’t you just love the acronym-loving Social Security Administration? Errr… SSA.). The AIME is calculated by taking the highest-earning (by index) 35 years of your working life while covered by Social Security, and then computing an average monthly amount based upon those indexed amounts.

Gobbledy-gook, right? Okay, here’s another way to explain it: as you work in a Social Security insured job, your earnings are recorded each year. Each year the SSA applies an index to the year, based upon an index called the Average Wage Index, and yours is based on the year you’ll reach age 62. These indexes for each year of your earnings will be adjusted with each new year, reflecting the change from when your earnings were recorded in comparison to the year you reach age 62.

Once you are eligible for retirement (age 62, your Earliest Eligibility Age, or EEA), these years of earnings are put into a table and the indexes applied. Listed below is an example of an earnings table with indexes applied (keep in mind this is an example for a specific age – your own indexes will likely be different):

Average Indexed Monthly Earnings

Age

Earnings

Index

Indexed Earnings

22

$ 5,000.00

7.4186559

$37,093.28

23

$ 5,589.41

7.0133446

$39,200.47

24

$ 5,771.91

6.6817598

$38,566.51

25

$ 5,951.90

6.362084

$37,866.51

26

$ 6,259.69

5.794243

$36,270.16

27

$ 6,598.18

5.453047

$35,980.19

28

$ 6,724.29

5.147081

$34,610.48

29

$ 7,263.44

4.789173

$34,785.89

30

$ 7,652.52

4.480037

$34,283.57

31

$ 8,151.79

4.226722

$34,455.35

32

$ 8,771.10

3.915769

$34,345.61

33

$ 9,095.79

3.600777

$32,751.90

34

$ 9,809.52

3.303241

$32,403.21

35

$10,300.66

3.001138

$30,913.71

36

$11,796.26

2.84454

$33,554.93

37

$12,072.71

2.712404

$32,746.07

38

$13,417.50

2.561809

$34,373.08

39

$15,014.39

2.457123

$36,892.20

40

$16,488.37

2.386295

$39,346.11

41

$17,578.53

2.243234

$39,432.76

42

$19,816.33

2.137938

$42,366.08

43

$20,064.41

2.056512

$41,262.70

44

$22,795.36

1.965713

$44,809.12

45

$25,440.98

1.895091

$48,212.98

46

$26,801.49

1.802233

$48,302.53

47

$27,536.23

1.786866

$49,203.55

48

$30,992.15

1.740161

$53,931.33

49

$34,893.01

1.673097

$58,379.40

50

$36,396.83

1.595089

$58,056.18

51

$36,936.43

1.507145

$55,668.58

52

$41,035.24

1.432187

$58,770.12

53

$42,533.74

1.356586

$57,700.69

54

$45,383.43

1.285498

$58,340.33

55

$50,034.62

1.255546

$62,820.74

56

$51,454.51

1.243079

$63,962.02

57

$55,140.29

1.213416

$66,908.14

58

$61,014.02

1.159513

$70,746.57

59

$64,329.16

1.118584

$71,957.57

60

$67,170.90

1.06943

$71,834.56

61

$73,383.51

1.023004

$75,071.63

62

$82,983.83

1

$82,983.83

Average of top 35 years

$49,898.35

Monthly Average

$4,158.20

So what this table shows is that your wages earned in each year you were working have been indexed to compare with the Average Wage Index for your age 62 year, then the top 35 indexed earnings years are totaled and divided by 420 to come up with the Average Indexed Monthly Earnings – your very own AIME. The reason they’re divided by 420 is that this is the number of months in 35 years. The AIME is always produced by dividing the top 35 years by 420, even if there are fewer than 35 years in the table (such as if you had years without earnings).

With this table in mind, you can see how the AIME can increase if you continue working past age 62 – of course those earnings will be added to the table (but not indexed after age 62), and assuming that this knocks out one of your lower earning years, the average would increase.

And, as you might guess, this AIME isn’t the amount of retirement benefit that you can expect: more factors need to be applied to come up with your PIA, and then your actual retirement age is applied to that.

5 Comments

[…] the calculation process called Bend Points. Bend Points are the portions of your average income (Average Indexed Monthly Earnings – AIME) in specific dollar amounts that are indexed each year, based upon an obscure table […]

[…] up with an annual average wage base of $92,172, or a monthly average wage base (also known as the Average Indexed Monthly Earnings or AIME) of $7,681. Applying the bend points to this (see the Bend Point article for details) we come up […]

[…] start out by understanding your Primary Insurance Amount, which begins with your Average Indexed Monthly Earnings (AIME), and then take the Bend Points for the current year into account. For 2010 and 2011, the […]

Jim provides expert guidance for
your Retirement, Education Funding,
and Income Tax issues and concerns.
In addition to this blog, you’ll find Jim’s writings all around the internet, as he is a regular contributor to Forbes.com, TheStreet.com, and FiGuide. Several other sites also republish his work.

The books!

Jim’s newest book, A Medicare Owner’s Manual, was published in January 2019 and is available on Amazon at this link. This book is the third in the “owner’s manual” series, complimenting the IRA and Social Security owner’s manuals (below).

Social Security for the Suddenly Single can be found on Amazon at this link. This book is narrowly-focused on divorcee Social Security strategies and rules. It is also available in a Kindle version.

An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. This edition has been updated for 2019. Click the link to choose the paperback version, or the Kindle version.

Jim’s book – A Social Security Owner’s Manual, 4th edition, is also available on Amazon. This edition has been updated for 2019. Click this link for the Amazon ordering page.

Queuing Waterfowl

In case you hadn’t already noticed, this blog doesn’t have much to do with ducks – or any waterfowl for that matter.

No, what we’re doing here is talking about all things financial; getting your financial house in order. Here in the Midwest, “getting your ducks in a row” implies organization, which is one of the outcomes of having a better understanding of your financial life.

I hope you find the answers you’re looking for among the articles here, and perhaps a smile. If you can’t locate your answer, drop me an email or give me a call – we’ll see what we can find for you.

And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.

Subscribe to this blog by Email!
You’ll get a personal email every time a new article is posted – and your email will never be used for anything else without your permission.

Privacy & Cookies: This site uses cookies. By continuing to use this website, you agree to their use.
To find out more, including how to control cookies, see here:
Cookie Policy